I’d put £20,000 in these 3 stocks to aim for a £4,526 annual passive income

Looking for long-term passive income? I am, and I intend to use as much of my annual Stocks and Shares ISA as I can to get it.

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With some FTSE dividend yields up around 10%, I think this could be the best time in years to build a passive income from stocks.

So if I could use my full £20,000 ISA allowance, which ones might I buy?

Big yield

Investing sentiment is gloomy right now. But I wouldn’t be here if I didn’t see long-term cheer. So I think it makes sense to buy into that sentiment as directly as I can.

That means going for a firm that offers investing services, like abrdn (LSE: ABDN). Shares in abrdn fell almost 30% in August, after a first-half pre-tax loss of £169m.

That was better than 2022, but it really didn’t impress the markets. And until we see some profit growth, it could mean a longer spell in the dumps.

But the dividend is up as high as 9.3%. And for those who see a long-term future in the asset management business, I reckon abrdn could make a good passive income buy.

Weak finance

The financial sector has been crushed by high inflation and interest rates. And that makes a lot of top quality insurance firms look like bargain basement buys to me.

I really fancy Phoenix Group Holdings (LSE: PHNX), on a 10% dividend yield. I could be just as happy though with Aviva or Legal & General.

Even if today’s investors are gloomy, faced with those high inflation and interest rates, analysts see earnings rising in the next few years.

The insurance business is often hit hardest when there’s financial pressure. And that could mean shares in the sector still have more short-term pain ahead.

But you know what they say, short-term pain before long-term gain. And if they don’t say that, they should.

Nowt like houses

As long as there’s a shortage of housing, I reckon housebuilders like Taylor Wimpey (LSE: TW.) should keep on raking in the cash.

But there’s a property slump now, isn’t there? Well, yes, there is. And I love it!

That’s because markets overreact and shares related to property become too cheap. At least, I think they’re cheap. And, yes, they could get even cheaper. That’s the danger.

But we’re looking at an 8.5% dividend yield here. And if that holds up, this could be another long-term cash cow to help towards building some passive income for my retirement.

City analysts seem to think well of Taylor Wimpey too. The consensus shows earnings and dividends creeping up in the next three years.

How much?

These three dividends average out to 9.3%. But I don’t want the money this year. And I don’t want it for next year either.

I just want to buy more shares with it, and let the magic of compound returns weave its spell.

If I do that for 10 years, my pot could grow to a shade over £323,500. And 9.3% could then put that headline £4,526 into my pocket each year.

Now, things can go bad, dividends can fall, and I might not make that much. But then again, if things go well, maybe I could make even more!

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alan Oscroft has positions in Aviva Plc. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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